UPDATE: CW Could See $1B From 4-Year Licensing Deal With Netflix

UPDATE, 11:10 AM: This deal’s more lucrative than it initially seemed. Wells Fargo Securities analyst Marci Ryvicker figures it could be worth as much as $1B for CW. While she acknowledges that “the accounting is somewhat complex,” she says that CBS — which co-owns CW with Time Warner — might see an additional 5 cents a share annually. Lazard Capital Markets’ Barton Crockett says it could contribute 2 cents a share to Time Warner. “The money-losing CW may also retain a minority of the Netflix fee, helping reduce its losses,” he adds. The deal’s so valuable because CW’s young-skewing shows fit well with the audience that streams shows on demand from Netflix. What’s more, Netflix’s payments escalate for long-running series.

Warner Bros Television Group president Bruce Rosenblum won’t comment on the financials but says the terms “won’t be repeated” because “other networks don’t own (as much of) their own content.” This isn’t an exclusive deal in the traditional sense — the shows can appear elsewhere — but Netflix has a narrow right to show entire seasons on-demand from previous years. (Others can license select episodes.) “We know from Day 1 that the syndication on-demand window has been sold, but we also have the ability to sell linear rights down the road,” Rosenblum says. CW shows also may continue to run on Netflix even if the deal isn’t renewed; the online service has the right to keep offering series that begin while it’s in force.

PREVIOUS, 7:55 AM: This one follows the usual pattern: Nothing current — just previous seasons of CW series. And it’s not exclusive. Producers can continue to sell their shows in syndication and to other digital services. No mention of how much Netflix will pay for the programming. Here’s the release:

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How much of this revenue will trickle down to the creators of these shows? I would say...

frogwatcher

3 years

This will likely end speculation about The CW's future for a while. A Billion dollars to owners...

October 13, 2011 — CBS Corporation and Warner Bros. Television Group announced today a licensing agreement with Netflix [Nasdaq: NFLX] allowing U.S. members of Netflix to instantly watch previous seasons of scripted series that air on The CW from its current schedule through the 2014-15 season.

As part of this four-year output deal, Netflix has licensed the rights to stream more than 700 hours of previous-season episodes of The CW’s young-skewing dramas as well as future programs. These rights extend for four years after each series, current or future, ends its broadcast run on the network. The CW content can also be made available via traditional syndication windows, electronic sell-through services and, on a partial-season basis, through authenticated cable providers.

Previous seasons of “The Vampire Diaries,” “Gossip Girl,” “One Tree Hill” and “Nikita” will be available to watch instantly on October 15, with previous seasons of “Supernatural” and “90210” beginning in January 2012. Episodes of all scripted series airing on The CW this broadcast season will premiere for Netflix members in Fall 2012. In addition, all episodes of future scripted series appearing on The CW through the 2014-15 season will be available to stream from Netflix through a commensurate window.

With this agreement, Netflix members can catch up on prior seasons of the network’s addictive serialized dramas streaming from Netflix as well as watch new episodes on The CW during their in-season broadcast.

“This is a forward-thinking agreement for a network whose programming occupies a unique space in the content marketplace,” said Leslie Moonves, President & Chief Executive Officer, CBS Corporation. “It is a model that opens a new door for The CW programming to expand its audience reach through the terrific Netflix service, and creates a brand-new window for CBS and Warner Bros. to be paid for the content we supply the network. It also further illustrates how new distribution systems are providing premium content suppliers with additive revenue streams while still preserving traditional monetization windows.”

“This proves once again the overriding importance of content in our business, while showing how emerging platforms such as Netflix are adding value to the traditional TV ecosystem,” said Barry Meyer, Chairman & CEO, Warner Bros. “And to open a new window like this for our television product strengthens the increasing value of our powerful, deep and growing portfolio.”

“We have long admired the CW’s ability to connect so passionately and directly with a very important and difficult to reach demographic,” said Ted Sarandos, Chief Content Officer at Netflix. “This is programming for the on-demand generation and we hope this agreement deepens the relationships viewers already have with these powerful entertainment brands.”

“This agreement is a clear example of why content creators and providers can and will grow stronger through technology partnerships tailored to the consumer,” said Bruce Rosenblum, President, Warner Bros. Television Group and Office of the President. “It extends our traditional syndication windows with a strong, additive revenue play perfect for serialized dramas, and portends even greater growth opportunities for our studio as we continue to explore and define the marketplace.”

“This deal works across multiple levels for us,” said Mark Pedowitz, President, The CW. “Not only will we be able to recruit new viewers for our shows through the powerful reach of Netflix, but it also makes The CW an even more attractive option to the creative community.”

FINALLY! A second chance to see shows no one was interested in years prior.

If only they invested more in licensing rights to Richard Grieco direct to video films.

tommy • on Oct 13, 2011 11:10 am

This would be great if they had access to shows that have since gone off the air like “Melrose Place,” “Reaper,” “Life Unexpected” etc.

Jessica • on Oct 13, 2011 11:10 am

tommy, all three of the shows you mention have already been made available on Netflix Watch Instantly.

Don J • on Oct 13, 2011 11:10 am

Melrose Place 2.0 and Life Unexpected are already on Netflix streaming. And Reaper is already there through the deal signed with ABC Studios.

CT • on Oct 13, 2011 11:10 am

All three of those series are available already on Netflix Instant Watch.

jemm • on Oct 13, 2011 11:10 am

“Reaper” is available on Netflix.

Amanda • on Oct 13, 2011 11:10 am

That would be awesome. I have a lot of catching up to do for Smallville! And it was a hit show, so I don’t know why it wouldn’t be allowed in Instant.

Bob • on Oct 13, 2011 11:10 am

So for TV shows, Netflix is just another syndication outlet. Whoop-de-freakin-do.

The question that can never be answered: Netflix Who?

lsb • on Oct 13, 2011 11:10 am

What did you expect; first run just released movies for 7.99 a month? GET REAL Remember Content providers (media companies) CONTROL everything, when where how, NOT Netflix.

Betty Boop • on Oct 13, 2011 11:10 am

How can Netflix sustain itself in the long-run with these exorbitant streaming fees that it is paying to the networks and studios?

Were they paying similar fees for the DVDs?

Benjamin • on Oct 13, 2011 11:10 am

I think I remember reading that Netflix has 12 Million streaming customers, so if I calculated correctly, it is only $0.83 cents per Netflix customer for this particular streaming deal (valued at $1 Billion). But there are lots of streaming deals Netflix already has, and will have in the future, so not sure if it will really turn out to be any better profit versus DVDs (which they aren’t making any profit on at all). Everything Netflix is into is pretty much a loosing proposition.

I read an article that quoted an analyst saying that Amazon wanted to purchase the streaming portion of Netflix (which is why the whole Quikster thing happened), but when there were so many lost customers, and outrage, Amazon stepped away from the deal. Basically Netflix is in a situation where both business models (DVDs and Streaming) maybe just doesn’t see too much of a long-term future, and they want out. The thinking is maybe if they’re separate companies that one can focus on just that. It would be beneficial if Amazon bought the streaming half. They’re a good option, because if all else fails they can fall back on multiple income streams that they already have. While currently Netflix doesn’t have any other income streams.

Alisha Bees • on Oct 13, 2011 11:10 am

Netflix got hosed…

Sareeta • on Oct 13, 2011 11:10 am

This is actually pretty interesting since I’ve been wanting to catch up on The Vampire Diaries. I’ve found it irritating that The CW doesn’t make its series available On Demand like almost every other network and if you watch any of the new series live or online you have to deal with stupid commercials teasing the current season of series you might not be caught up on.

Supernatural is their best series, so I wonder why they’re holding off on making previous seasons available until 2012. I’ve been catching up on Supernatural through TNT, so not a big deal, but for others…

I might renew my subscription to Netflix (temporarily) just for this.

anya • on Oct 13, 2011 11:10 am

I think this might actually help the CW, the main problem with the CW demographic is that they are far less likely to watch all the shows live. It makes sense that they would actually watch these on Netflix at their own convenience. (with obv added benefit of no ads and full series availability vs something like Hulu). And I think in general the trouble for CW shows both in the US and abroad is that they end up being illegally streamed/downloaded online so this doesn’t reflect in viewership.

Josh • on Oct 13, 2011 11:10 am

CW? A billion dollars? Give me a break.

frogwatcher • on Oct 13, 2011 11:10 am

This will likely end speculation about The CW’s future for a while. A Billion dollars to owners CBS & Warners buys them some good time and proves there is a reason for their existence.

Billy Bob • on Oct 13, 2011 11:10 am

How much of this revenue will trickle down to the creators of these shows? I would say a good time for their business managers to do an audit.